Power Sector Engagement - NCICS · NCEI Climate Products and Services Market Analysis: Power Sector...

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NCEIClimateProductsandServicesMarketAnalysis:

PowerSectorEngagement

GlobalScience&Technology,Inc.

11Jan2016

2015

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Disclaimer

Acclimatise has exercised reasonable skill, care and diligence to assess the information acquiredduringthepreparationofthisreport,butmakesnoguaranteesorwarrantiesastotheaccuracyorcompletenessof informationprovidedby thirdparties.The informationcontained in this report isbased upon, and limited by, the circumstances and conditions acknowledged herein, and uponinformationavailableatthetimeofitspreparation.Theinformationprovidedbyothersisbelievedtobeaccuratebutcannotbeguaranteed.

Acclimatisedoesnotacceptanyresponsibilityfortheuseofthisreportforanypurposeotherthanthosestatedherein,anddoesnotacceptresponsibilitytoanythirdpartyfortheuseinwholeorinpartofthecontentsofthisreport.Anyalternativeuse,includingthatbyathirdparty,oranyrelianceonordecisionsbasedonthisdocument,aretheresponsibilityofthealternativeuserorthirdparty.

This reportwas initially released inAprilof2015asaconfidentialand internalNCEI report. In thewinterof2015Acclimatisewentthroughtheprocessofcreatingapublicversionofthisreportfordistribution. This was done by ensuring that the written content was reviewed and approved bythoseinterviewed.Thisreportisthepublicversion.

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ContentsExecutiveSummary...............................................................................................................................5

Introduction...........................................................................................................................................6

2. UnitedStatespowersectorprofile................................................................................................8

3. Climatedatainthepowersector.................................................................................................23

4. Valueofclimatedatatothepowersector...................................................................................34

AnnexA:Interviewcontactsfrompowersectoroutreach..................................................................37

AnnexB:Surveyonthevalueofclimateandweatherservices..........................................................40

Bibliography.........................................................................................................................................45

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Figures

Figure1-Revenuefromretailsalesofelectricitybysector,annual(figuresourcedfromEIA,2014).8

Figure2-PercentageofUSnetelectricitygenerationbyenergysource,2013(figuresourcedfromEIA,2014)...............................................................................................................................................9

Figure 3 - Trends in electricity generation by source from1949 to 2013 (figure sourced fromEIA,2014)......................................................................................................................................................9

Figure 4 - US electric utility industry statistics – number and percentage of electricity providers(figuresourcedfromAPPA,2015).......................................................................................................10

Figure 5 - Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs)(figuresourcedfromSustainableFERC,2014)....................................................................................11

Figure6 -USelectricitydemandgrowth,1950-2040,EIAReference case (figure sourced fromEIA,2014)....................................................................................................................................................12

Figure 7 - Electricity generation by fuel, EIA Reference case, 1990-2040 (figure sourced from EIA,2014)....................................................................................................................................................13

Figure8-Renewableelectricitygenerationbytype,allsectors,intheEIAReferencecase,2000-2040(figuresourcedfromEIA,2014)...........................................................................................................13

Figure9-USlargescalewindinstallationsingigawatts,2004-2014(figuresourcedfromBNEF,2015).............................................................................................................................................................14

Figure10-LevelizedcostofenergyforwindandsolarPV(figuresourcedfromLazard,2015).........15

Figure11-UScleanenergyinvestments,2004-2014(figuresourcedfromBNEF,2015)...................16

Figure12-GrowthtrendsforUSelectricityuseandUSGDP(figuresourcedfromEIA,2014)..........17

Figure13-Observedoutagestothebulkpowersystem,1992-2012(figuresourcedfromEIA,2013).............................................................................................................................................................21

Figure14-Numberandpercentageofrespondentsfromtheusercommunityonwheretheysourceclimatedata.........................................................................................................................................23

Figure15-Powersectorintervieweesbycategory............................................................................24

Figure17-Responsestoquestion"Wheredoyouaccessweatherandclimatedata?"....................41

Tables

Table1-Mapofactorsinthepowersector.........................................................................................7

Table 2 - Projected climate impacts and corresponding effects on electricity systems (Dell et al.,2014;WorldBank,2011).....................................................................................................................18

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ExecutiveSummary

AcclimatisewascommissionedbyGSTtounderstandhowclimatedatafromtheNationalCentersforEnvironmental Information is used and adds value to theUnited States power sector. This reportsynthesizestheresultsfromtheanalysiswiththeobjectiveofincreasingNCEI’sinsightandlayingaknowledge base to improve ongoing engagement with the sector. These results are informed byinterviews with 69 experts from companies, government bodies, trade groups, and non-profitinstitutions involved in or supporting power generation, transmission, and distribution. Theseinterviewsandresearchshowthatclimatedataisusedtoplanforthefuture,interpretpastevents,scrutinizeinvestments,increaseresilience,reducecarbonemissions,andtobetterservethesector’scustomers.

TheanalysisshowsthatNCEIoffersmaterialandinvaluablesupporttotheUSpowersectorthroughtheprovisionofclimatedataproductsandservices.Climatedatahasmanyin-depthapplicationsinthe power sector, but assigning value to these is challenging, particularly as NCEI data is oftencombinedwithdatafromothersourcesandtailoredtomeetspecificneedswithinthesector.Thisreportuntanglesvariousdirectandindirectdataapplications,identifyingwhatisuseful,whatisnotapplicableandfurthersectorneeds.Italsopresentsestimatesofthesocietalandeconomicvalueofclimatedatatothesector.

The importance of NCEI data to the power sector was clearly established throughout thisengagement. Weather is the largest and costliest variable to the sector, and businesses rely onNCEI’squalitycontrolleddatafordecision-making,andlooktoNCEIasasourceofrawinformationand scientific authority. Interviewees describe the climate services community as fragmented andevolving,and inneedof leadershipandopportunities toaddresscommonareasofconcern in thefaceofextremeweatherandclimateuncertainty.Thepowersectorreliesongovernmentagenciestotakethisleadershiprole.

NCEIisrespectedbyutilitiesandsolutionprovidersforthequalityandbreadthofdata.IntheirviewNCEIstandsoutamongitsinternationalcounterpartsbecauseitsdataisfreeandpubliclyavailable.Openaccessdatalevelstheplayingfieldallowingcompanieslargeandsmall,andthoseinthepublicsector,tomakeinformedandevidence-baseddecisions.Freedataalsoencouragesexperimentationwith different datasets or analyses, giving organizations flexibility and room to innovate. NCEI,throughitsscientificexcellence,qualitystandards,andopenaccess, ishelpingtopushforwardtheboundariesofknowledge,creatingjobs,addingvaluetotheeconomy,andunderpinningtheviabilityoftheUSpowersector.

Thisreportcontainsthefollowingsections:

• Sectorprofileofpowergeneration,transmission,anddistributionintheUS.

• Discussionofclimatevulnerabilitytothepowersector.

• AnalysisandexamplesofthehowthissectorusesNCEIproductsandservices.

• Valueofclimatedatatothepowersector.

ThisreportalsocontainstheresultsfromageneralsurveyofsolutionprovidersontheunitcostandrevenueoftheirproductsandservicessoldwhicharebasedonNCEIdata(AnnexC).

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Introduction

The National Centers for Environmental Information (NCEI, formerly the National Climatic DataCenter) and Global Science & Technology, Inc. (GST) commissioned Acclimatise to engage withorganizationsintheUnitedStates’powersectortoassesshowtheyuseclimatedata.ThisispartofNCEI’slargerstrategicplantoimproveandincreaseengagementwithendusers.

Theprimary goal of this report is to increaseNCEI’s understandingofhow thepower sectorusesclimatedataandtolayaknowledgebasewhichwillsupportongoingeffortstoimproveengagementwiththesector.Tomeetthesegoals,thisreportprovides:

• A profile of the sector’s essential economic and physical characteristics, trends andprojections,anditsvulnerabilitytoclimatechange.

• AnalysisandexamplesofhowthepowersectorusesNCEIproductsandservices.

• Discussionofthevalueofclimateandweatherdata.

Therearealsotwoannexeswithadditionalinformation:

• AnnexA:acompletelistofthe69expertsinterviewedforthisstudy.

• AnnexB:agenericengagementmodelforreachingouttoothersectorsusingthestructureandmethodologymodelledinthisreportforthepowersector.

1.1. Definingandmappingthesector

In consultationwithGSTandNCEI, itwasagreed to focus this studyon theelectricpower sector.ThislimitedtheanalysistoUScompaniesandsupportingestablishmentsinvolvedinthegeneration,transmission, and distribution (GTD) of electricity, as defined by North American IndustryClassificationSystem(NAICS)code2211(USCensusBureau,2012).Thisexcludesthebroaderenergysector,whichencompassescompaniesinvolvedintheextraction,processing,andtransportationoffossil fuels. As shownbelow, thepowerGTD sector represents a substantial part of the domesticeconomy,containsawiderangeofactors,andishometomanydistinctusesofclimatedata.

NAICS divisions represent defined sets of economic actors directly engaged in a specific activity.However, for the purposes of this sector engagement,we beganwith the sectorNAICS code andthen considered thewider range of companies and organizations that support the sector in theirvaluechains.Thisincludessuppliersofgoodsandservicesandthoserelatedtoclimateandweatherdata.

Table1mapsthedifferentkindsofcompaniesandestablishmentsthatmakeupthisbroaderpowerGTD sector. Special attention is given to organizations likely to require or provide climate andweatherdata.Mappingthesectorisacriticalfirststeptowardsdefiningthecategoriesofthesectorprofilebelow,aswellasidentifyingpeopletoreachouttoforinterviews.

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Table1-Mapofactorsinthepowersector

USPOWERSECTOR

Subsector CategoriesGeneration Thermal(coal,gas,petroleum)

NuclearHydroSolarWindOtherrenewables(biomass,geothermal)Independentpowerproducers(IPP)ConsultantsSoftware/datacompaniesTechnologyhardwarecompaniesRegulatorybodiesTradeassociations

Transmission RegionalTransmissionsOrganizations(RTO)IndependentSystemOperators(ISO)SpecifictransmissioncompaniesConsultantsTechnologyhardwarecompaniesSoftware/datacompaniesRegulatorybodiesTradeassociations

Distribution Utilities (local power companies, may be investor-, publicly- or cooperatively-owned,municipalorrural)NonutilitypowerproducersRetailandwholesalepowermarketersConsultantsTechnologyhardwarecompaniesSoftware/datacompaniesRegulatorybodiesTradeassociations

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2. UnitedStatespowersectorprofileThisprofilesurveysthecorecharacteristicsofthepowersectorintheUS,summarizingitsstructureandsignificancefortheeconomyandsociety.Arangeofeconomic,climaticandregulatorytrendsandchallengesfacingthesectorarealsodiscussedbelow.

2.1. Industryoverview

Theelectricpowersectoroperatesandservescustomersinallregionsacrossthecountry;althoughthemixofenergysources,theageandstructureofinfrastructure,andregulatoryformsvarywidely.

The electric power industry is essential to all industrial, commercial, and residential activities. In2013 (Figure 1 from the US Energy Information Administration), the US power sector sold $3.7millionKilowatt-hoursatanaveragepriceof10.11centsperkWh,earning$376billion inrevenue(EIA,2014).

Figure1-Revenuefromretailsalesofelectricitybysector,annual(figuresourcedfromEIA,2014)

Sometimesreferredtoasthe“largestmachineonearth,”theUSbulkpowersystemconsistsofover360,000milesoftransmission linesthatconnectover6,000powerplants (DOE,2008).Altogether,the US Department of Energy estimates the asset value of the North American electricityinfrastructuretobeover$1trillion(DOE,2012).

According to theUSBureauofLaborStatistics, thesectoremployedover480,000people in2013,81%ofwhichwereemployedbyprivatelyownedcompanies(BLS,2014).

These official statistics for the power sector do not reflect the various supporting actors, such astechnologicalhardware,software,andconsultingfirms,mentionedabove.

2.1.1. Energysources

Generation can be subdivided according to fuel sources, as seen in Figure 2. Coal remains thedominantsourceofelectricity-generation,followedbynaturalgasandnuclear(EIA,2014).

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Figure2-PercentageofUSnetelectricitygenerationbyenergysource,2013(figuresourcedfromEIA,2014)

Despiteitscontinueddominanceofthenationalenergymix,coal-firedgenerationhassteadilyfallen1.6% annually since 2000, while natural gas and non-hydropower renewables have increasedannuallyby4.9%and9.2%,respectively(seeFigure3)(EIA,2014).Governmentpolicieshaveplayedaroleinthesedevelopments,includingtheAmericanRecoveryandReinvestmentActin2009,newand proposed US Environmental Protection Agency (EPA) emissions standards, and state-levelRenewablePortfolioStandardsandtaxincentives,allofwhichhaveincreasedthecompetivenessofnaturalgasandrenewablesascomparedtocoal.

Figure3-Trendsinelectricitygenerationbysourcefrom1949to2013(figuresourcedfromEIA,2014)

2.1.2. Sectorconstituents

Anumber of actors under diverse regulatory structures are involved in theUSpower sector. Theprimarygroupsincludeutilities,systemoperators,andregulators,alongwitharangeofsupportingactors.

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2.1.2.1. Utilities

Electric utilities engage in the generation, transmission, and/or distribution of electricity for sale.They may be investor owned, publicly owned, cooperatives, or federal utilities. Utilities areregulatedby local, state,and federalauthoritiesand, in thecaseofelectric cooperatives,by theirboardofdirectors.Descriptionsofeachcategoryarelistedbelow.

Figure 4 -US electric utility industry statistics – number and percentage of electricity providers (figure sourced fromAPPA,2015)

• Investor-ownedUtilities (IOUs)areprivatecompanieswithpubliclytradedstock.Theyareregulatedandauthorizedtoachieveanallowedrateofreturndetermined,inmostcases,bya statepublic service commission.Most IOUs are large (in financial terms)withmulti-fueloperations acrossmultiple states.While IOUs represent just 5.8% of the total number ofutilitiestheyservenearly70%ofthepowersector’scustomersnationally(APPA,2015).ConEdisonandDukeEnergyareexamplesofIOUs.

• Publicly-owned Utilities are non-profit government entities financed through the sale ofgeneralobligationbondsandfromrevenuebondssecuredfromthesaleofelectricity.Thereare different types of publicly owned electric utilities in the country operating underdifferent city, state, and federal authorities. They were established to provide service totheir communities at cost and are able to issue low-cost, tax-exempt debt to financeconstructionprojects(PPA,2013).Publiclyownedutilitiesaccountforover60%ofthetotalnumberofutilitiesintheUSyetservelessthan15%ofallcustomers(APPA,2015).TheLongIslandPowerAuthorityandtheLosAngelesDepartmentofPowerandWaterareexamplesofpublicly-ownedutilities.

• ElectricCooperativesareindependent,non-profitelectricutilitiesownedbythecustomersthey serve. They typically serve rural areas often underserved by investor-owned utilities.Over a quarter of all utilities are cooperatives and serve about 10% of total customers(APPA,2015).PedernalesElectricCooperativeinTexasisanexampleofacooperative.

• Othergroups includepowermarketers,suchasACESPowerManagement,whoserve4.3%ofcustomersbybuyingandsellingelectricityasacommodityacrossthecountry.Therearealsotwofederalpoweragenciesthatserveanegligibleamountofusers.

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2.1.2.2. Systemoperators

There are two categories of independent, non-profit power transmission system operatorswhichensuretheeffectivefunctioningoftransmissiongridsacrosstheUS:IndependentSystemOperators(ISO)andRegionalTransmissionOrganizations(RTO).Thesemembership-basedorganizationsservenearlyidenticalfunctions,butarebasedondifferentFederalEnergyRegulatoryCommission(FERC)orders (RAP, 2011). Both ISOs and RTOs coordinate, control and monitor the use of the electrictransmission system by utilities, generators and marketers, but RTOs generally cover largergeographic areas. The Southwest Power Pool (SPP) is an example of an RTO. The New YorkIndependentSystemOperator(NYISO)isanexampleofanISO.

Figure5 - IndependentSystemOperators (ISOs)andRegionalTransmissionOrganizations (RTOs) (figuresourced fromSustainableFERC,2014)

2.1.2.3. Regulatorybodies

Atthefederallevel,theDepartmentofEnergy(DOE)hasthebroadestresponsibilitiesinregulatingpower generation, electric transmission, distribution and retailing. Additional regulatory bodieshandle specific aspects of the US electric power sector, e.g. safety regulations and enforcement.These include the Federal Energy Regulatory Commission (FERC), an independent agency thatoverseesmanyactivitiesinthesector,includingprices,safety,mergers,andenvironmentalmatters.

Each state has its own public utility commission that works in partnership with FERC to regulateenergyoperationsandsafety.Statepublicutilitycommissionsaregoverningbodiesthatdeterminerevenuerequirements,setratestructures,andmandatequalitystandardsforregulatedutilitiesaswellasservingasthearbiterofdisputesbetweenutilitiesandcustomers(RAP,2011).

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2.1.2.4. Supportingactors

Inadditiontotheprivateandpublicsectoractorsdescribedabove,thereisawider‘ecosystem’oforganizations providing support to the industry. These include firms specializing in technologicalhardware, engineering, industry consulting, and software development, together with academicresearch institutions, universities and trade and professional bodies.Many of these organizationsassistcompaniesbydevelopingandpromotingbestpractices.

2.1.3. Trendsandforecasts

In recent years there have been several important emerging trends affecting the electric powersector.Privatesectorreportsandgovernmentforecastsprovideasnapshotintohowtheindustryischanging. Data concerning efficiency improvements, innovation in generation, coal plantretirements,increasedreserveofnaturalgas,andshiftinginvestmentandemploymentpatternsallindicatesignificantchangesinhowAmericansproduceandconsumeelectricity.

2.1.3.1. Demandandconsumption

Therateofgrowthofelectricitydemandhassteadilydecreasedsincethe1950sand is forecasttoleveloffat1.5%annualthroughto2040,accumulatingina29%increaseinpowerconsumptionascomparedto2012(seeFigure6).However,demand increasesareexpectedtobe largelyoffsetbyadvancementsinenergyefficienttechnologiesthatarechangingthewaysconsumersuseelectricity(EIA,2014).

Figure6-USelectricitydemandgrowth,1950-2040,EIAReferencecase(figuresourcedfromEIA,2014)

2.1.3.2. Fuelsources

While renewables continue to grow and nuclear remains steady, the largest shift in energygenerationwillbebetweencoalandgas(seeFigure7).AccordingtotheUSEIA,naturalgaspoweredgeneration,whichprovided27%ofelectricityin2013,willgrowto35%by2040.Atthesametime,coaluseingenerationisexpectedtodropfrom39%in2013toabout32%in2040.EIAattributesthistrendtotherelativelylowcostofnaturalgasaswellastheretirementsofcoal-firedpowerplants.Coalplantshutdownswillincreasedramaticallyasnewregulationsforsulfur,nitrogen,andmercuryemissions come into effect, in addition to PresidentObama’s proposedClean Power Plan limitinggreenhouse gas emissions (BNEF, 2015). However, the number of coal plant retirements is not

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entirelyproportional toadecline in coal-firedelectricity generation capacity as a largepercentofplantsexpectedtoretireoperateatoutputlevelslowerthantheircapacity(EIA,2014).

Figure7-Electricitygenerationbyfuel,EIAReferencecase,1990-2040(figuresourcedfromEIA,2014)

2.1.3.3. Renewables

Renewablegenerationisthesourceofmuchinnovationandmovementinthepowersector.TheEIAforesees total renewable electricity generation growing by 1.9% annually in the coming decades,from 502 billion kWh in 2012 to 851 billion kWh in 2040 (see Figure 8). Non-hydropowerrenewables, namelywind, solar, geothermal, andbiomass,will drive the growth at an average of3.2%peryearandwillaccountforroughlytwo-thirdsofallrenewableelectricitygenerationby2040(EIA,2014).

Figure 8 - Renewable electricity generationby type, all sectors, in the EIAReference case, 2000-2040 (figure sourcedfromEIA,2014)

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Solarenergyhasseensignificantgrowthinrecentyearswithcapacityincreasingby418%from2010to2014 (EIA,2014).EIA forecasts continuedgrowth in solarbutat themoremodest rateof7.0%annuallyfrom2012to2040.Althoughphotovoltaic(PV)capacityhasincreasedinboththeelectricpower(centrallysited)andend-use(customersited)sectors, thescheduledexpirationoftheSolarInvestmentTaxCreditin2016willleadtoareductionintheupwardtrend(seeFigure9,EIA,2014).

Windpowerhasalsoexperiencedimpressivegrowthinthelast10years.ArecentDOEreportfoundthatinstalledcapacitymorethantripledbetween2008and2014(DOE,2014).However,growthhasnotbeenconstant (seeFigure9),witha temporarydrop in2013between theexpirationofakeyfederalincentive,theProductionTaxCreditattheendof2012,anditssubsequentextensionin2013(BNEF,2015).TheEIApredictsthatwindgenerationwillcontinuetogrowatanaveragerateof2.0%per year andprovide the largest absolute increase in renewable generationas a resultof startingfromahigherbaselineofinstalledcapacity.

Figure9-USlarge-scalewindinstallationsingigawatts,2004-2014(figuresourcedfromBNEF,2015)

The fundamental reason for the growth in wind and solar energy are falling costs along withgovernment support in the form of tax benefits or other incentives. A study by the assetmanagement firm Lazard shows that the levelized cost of energy, or the cost per unit of energyproduced,hasfallen58%and78%overthepast5yearsforwindandsolarpower,respectively(seeFigure 10) (Lazard, 2014). Many industry analysts and utility executives say that this trend isexpectedtoaccelerate(Cardwell,2014).

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Figure10-LevelizedcostofenergyforwindandsolarPV(figuresourcedfromLazard,2015)

Other renewables are predicted to see significant increases as well, though from much lowerstartingpointsthanwindandsolar.Geothermalpowerfollowssolarasthesecond-fastestgrowingsourceof renewableelectricitygeneration in theEIA’sanalysis. It is forecast to increase from lessthan 16 billion kWh in 2012 to 67 billion kWh by 2040, at a 5.4% average annual growth rate.Biomassgeneration isalsoexpectedtoseesignificantgrowthatanaverageof4.4%peryearfrom2012to2040(EIA,2014).

2.1.3.4. Investment

Manyofthetrendsdescribedabovehavebeendrivenbyindustryinvestmentpatterns.Maintainingand improving electric power infrastructure to meet demand has required steadily increasingexpenses as much of the nation’s energy infrastructure has begun to age. As a whole, investorowned utilities have more than doubled their annual capital investments over the past decade,boostingexpendituresfromatotalof$43billionin2003toaprojected$103.3billionin2014(EEI,2014b).Thebulkofthisspendinghasbeenspreadacrossgeneration,transmission,anddistribution,with the key priorities of increasing reliability, decreasing congestion, connecting new sources ofgeneration(includingrenewables),andupgradingoldinfrastructure(EEI,2014b).Otherinvestmentswere largely motivated by the need to harden transmission and distribution networks againstextremeweatherevents.

Since2007,totalinvestmentinrenewablesfromboththepublicandprivatesectorhasamountedto$386 billion. Investments in 2014 were $51.8 billion, part of a steadily upward trend in totalinvestment(asseeninFigure11).ThisnumberplacestheUSasthesecondbiggestinvestorincleanenergybehindChina(BNEF,2015).

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Figure11-UScleanenergyinvestments,2004-2014(figuresourcedfromBNEF,2015)

2.1.3.5. Employment

Even as investments into infrastructure and facilities have increased, the US Bureau of LaborStatistics (BLS) predicts a substantial decline in the private sector electric power utilityworkforceover thenextdecade,downto350,600workersby2022.Thebureauattributes this trendtonewtechnologieswhich allow power plants to be operated andmaintainedwith fewerworkerswhileincreasesinenergyefficiencyhelpcompensateforrisingdemandforpower(BLS,2013).

2.1.4. ChallengesandOpportunities

The trends described above are already remaking the landscape of electricity generation,transmission,anddistribution.Goingforward,theelectricpowersectorwillfaceavarietyofissuesthatmaythreatentraditionalbusinessmodelsandoperatingprocedures.

2.1.4.1. Anemicdemandgrowth

Over recent decades, improvements in energy efficiency, spurred by government mandates andtechnological innovations,alongwithshiftingcustomerbehavior,haveslowedgrowthinelectricitydemand.Thesefactors,combinedwiththeemergenceofdistributedgeneration(discussedbelow),havecausedsalevolumetoweakenassalesnolongertrackGDPgrowth,ashadbeenthehistoricalpattern(seeFigure12).Thisdecreasestherevenuestreamsofutilities.Analystsandindustryexpertsbelieve this trendwill forceutilities toseek increasedrates tostabilizeearningsandmaydiminishtheirability to invest in infrastructureupgrades,climate resiliencemeasures,or renewableenergy(AspenInstitute,2013).

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Figure12-GrowthtrendsforUSelectricityuseandUSGDP(figuresourcedfromEIA,2014)

2.1.4.2. Distributedgeneration

Distributedgeneration(DG)threatenstofurtherupendthetraditionalutilitybusinessmodel.DGisenergy produced at point of consumption from sources such as rooftop solar PV, small scalecombined heat and power plants, onshorewind farms, or other sources, rather than at a centrallocation.Thesesmall,flexiblesystemscanpowerhomes,businesses,andcommunities,butthreatenutilitieswithlostrevenues,andultimatelythosewhorelyonDGstillrelyonutilitygridinfrastructurefor backup or to sell excess power. In losing revenues while still paying for expensive gridmaintenance,utilitiesareforcedtoraisecostsforothercustomers,creatingapositivefeedbackloopthatencouragesevenmorecustomerstoswitchtoDGsystems.Thisscenariocouldleadtoa“utilitydeathspiral”(EEI,2013).

2.1.4.3. Smartgriddevelopment

Smartgridsare theapplicationofdigital communicationsand information technologies, computerprocessing, and networking capabilities used to monitor, analyze, and control electricityconsumption and generation (DOE, 2015). They provide utilities with actionable information thatallowsthemtobettercontroltheirgenerationanddistribution,aswellastobettermanageusagepatternsand reducecosts. Theautomationand integrationcomputing technologies in smartgridscan better anticipate and troubleshoot problems, such as power outages and equipment failures,than human system operators, saving time, money, and resources. From 2010-2013, the powersector spent $18billion on smart grid projects,with half of the total stemming from investmentsmadeunderthe2009AmericanRecoveryandReinvestmentAct1(DOE,2014).However,adoptionofthese systems varies greatly across the nation as different state and local policies and incentivestructuresevolve.

2.1.4.4. Terrorismandcybersecurityrisks

Inadditiontonaturaldisasters,thepowersectorhastoconsiderhumanthreatstoitsinfrastructureand operations. Sophisticated attacks on physical grid infrastructure, as well as infiltration andsabotage of digital systems pose challenges for the industry by threatening grid reliability andfunctionality (GAO, 2012). The cyber threat has grown inmagnitude as automated systems haveproliferatedwiththedevelopmentofsmartgridtechnologies.

1 This Act included a number of spending and tax benefit programs to stimulate the national economy, includinginvestmentsdirectedatthepowersector.

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2.1.4.5. Regulation

ForthcomingEPAgreenhousegasregulationswouldimposenewstandardsforutilityemissions,andhave beenmet with resistance by power sector groups who argue that they will increase costs,decrease system reliability, and causeutilities to losebillionsof dollars in stranded assets (PowerMag,2014).Shouldtheregulationsgointoeffect,thiswouldlikelyresultinasubstantialnumberofcoalplantretirementswhileboostingnaturalgasandrenewablegeneration.

2.1.4.6. Vehicleelectrification

Thegrowthanddevelopmentoftheelectricvehiclemarketiswidelyviewedasapotentialboomtothepower industry. TheEdisonElectric Institute (EEI) calledelectric vehiclesa “quadruplewin” interms of boosting demand, engaging with customers, meeting environmental goals and reducingoperational costs through the electrification of their own fleets (2014). In emphasizing theimportance of electric vehicles the report concluded, “the electric utility industry needs theelectrificationof thetransportationsector toremainviableandsustainable in the longterm”(EEI,2014a).

2.2. Climatevulnerability

Inthissectionanintroductiontotheimpactsonthepowersectorisprovided.Othermoredetailedreports are available, including the 2014 National Climate Assessment chapter on Energy2. Thepowersector isvulnerabletothephysicaleffectsofclimatechange, includingrisingtemperatures,decreasedwateravailability,andtheincreasedfrequencyandseverityofextremeweatherevents,allofwhichcanimpactpowergeneration,transmission,anddistribution.Table2summarizessomeofthevulnerabilitiesrelativetokeyelementsofthepowersector.

Table2-Projectedclimateimpactsandcorrespondingeffectsonelectricitysystems(Delletal.,2014;WorldBank,2011)

Category Climateimpact Effectonsector

ThermoelectricPowergeneration(coal,naturalgas,andnuclear)

• Increasingairandwatertemperature

• Decreasingwateravailability• Increasingintensityofstorm

events,sealevelrise,andstormsurge

• Increasingintensityandfrequencyofflooding

• Reducedgenerationcapacityandefficiency,andincreasedriskofexceedingthermaldischargelimits

• Reductioninavailablegenerationcapacity

• Increasedriskofphysicaldamageanddisruptiontoinlandandcoastalfacilities

Hydropower • Increasingairtemperaturesandevaporativelosses

• Changesinprecipitationanddecreasingsnowpack

• Increasingintensityandfrequencyofflooding

• Reductioninavailablegenerationcapacityandchangesinoperations

• Increasedriskofphysicaldamageandchangesinoperations

Windpower • Variationinwindpatterns• Stormsurges• Extremeweatherevents

• Uncertainimpactonresourcepotential

• Damagetooffshorewindturbines• Damagetophysicalinfrastructure

2TheNCA2014energyreportisavailablehere:http://nca2014.globalchange.gov/report/sectors/energy

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Solarenergy

• Increasingairtemperatures• Humidityandcloudcover

changes• Decreasingwateravailability

• Reductioningenerationefficiency• Uncertainchangeinpoweroutput• Reductioninpotential

concentratedsolarenergygenerationcapacity

Transmissionanddistribution

• Increasingairtemperatures• Morefrequentandsevere

wildfires• Increasingintensityofstorm

events

• Reductionintransmissionefficiencyandavailabletransmissioncapacity

• Increasedriskofphysicaldamageanddecreasedtransmissioncapacity

• Increasedriskofphysicaldamage

2.2.1. Thermoelectricpower

Thermalpowersystemsproduce themajorityof theelectricity in theUS,and faceseveralclimatevulnerabilities.

EachkWhofelectricitygeneratedatathermalplantrequiresroughly94.6 litersofwater,whichislargely used for cooling (World Bank, 2011). These facilities are the largest single consumers offreshwaterintheUS,withestimatedwithdrawalsatover200billiongallonsperday,accountingfor40% of all freshwater usage nationwide (DOE, 2013).While changes in the timing or quantity ofwater supply can impact generation, specific impacts on productionwill differ across the countryunder climate change scenarios, with some regions seeing increases while others experiencesignificantdecreasesinwateravailability.

Heating and coolingprocesses are affectedby ambient conditions such as temperature, pressure,and humidity (World Bank, 2011). Increased air andwater temperatures reduce the efficiency ofthermoelectricgeneration,whichcanreducepoweroutputandrequireadditionalfuelconsumption,increasingcosts.

Higher air temperatures increase the air volume and energy consumption in the compressor,reducingenergyproductioncapacity.Themagnitudeofthis impactcanreducepoweroutputfrombetween0.3%and1.8%foreach1°Cincreaseinairtemperature(DOE,2013).Whilerelativelysmallin percentage terms, these reductions can have substantial accumulated consequences for powergeneration.

Limitson thermaldischargealsoposechallenges for thermoelectricgeneration. If thewaterbeingdischarged is considerably warmer than the ambient water temperature, this form of thermalpollution can damage aquatic ecosystems and contravene regulations on discharge (PNNL, 2012).Climatechangeisexpectedtomakeitmoredifficultforplantstocomplywiththeserulesandthismaydisruptorreducegeneration.Severalfacilitieshavefacedtemporaryshutdownswhenhigherwater temperatures disabled their ability tomeet compliance (DOE, 2013). For example, in 2007,2010, and 2011, heatwaves in the Southeast caused the temperature of the Tennessee River toexceed32.2°C.Thisforcedthepowerplanttooperatebelowitsnormalcapacitytoavoidexceedingthermal discharge limits. This increased costs to operatorswhowere either forced to bringmoreexpensivegenerationplantsonline,orbuyenergyonthespotatahighermarketprice(PNNL,2012).

Theprojectedincrease inthefrequencyandseverityofextremeweatherevents isanotherthreat.Stormsurge,sea level rise,hurricanes,andfloodingall representconsiderablerisk,particularly forcoastalandriversidefacilities(DOE,2013).

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2.2.2. Hydropower

Hydropower generation likely faces the largest degree of climate risk among renewable sources.Rising temperatures, changingprecipitationpatterns, anddecreased snowpack are alreadyhavingmaterial impacts on hydropower facilities (DOE, 2013). Changing precipitation patterns, seasonalandannualrunoff,andstreamflowcouldeitherincreaseorreducehydropowergenerationcapacity,depending on the region (ORNL, 2012). Water loss from increased evaporation and upstreamconsumptioncoulddirectlyreducegenerationcapacity(CCSP,2007).

Indirectly, increasing ambient air and water temperatures could affect water quality, which mayhavesignificanteffectsonaquatichabitatsandwildlife.Thepotentialfortheseadverseimpactsmayleadtoregulatory limitsonhydropower flowreleases tomitigateecologicaldamage (FERC,1996).These requirementswould reducepeak generation capacity anddiminishoperational flexibility ofhydropowerfacilities(DOE,2013).

Extreme weather can also impact hydropower production. Increasing intensity and frequency offloodingcanincreaseriverflowsandgenerationcapacityiftheexcesswaterremainswithinadam’sreservoircapacity(DOE,2013).However, inseverecases,floodscanbedestructivetohydropowerinfrastructure. Sediment and debris carried by floodwaters can cause blockages and damagefacilities’ critical structural components, increasing repair costs and reducing the lifetime ofinfrastructure.

2.2.3. Wind

Whiletheavailabilityandreliabilityofwindpowerisafunctionofclimateconditions,itisuncertainhow climate change will affect wind patterns. No consensus exists as estimates of future windresourcesvarygreatlybasedonregion,emissionsscenario,andclimatemodel(DOE,2013).Severeweathereventshowevercanaffecttheperformanceanddurabilityofturbines(WorldBank,2011).Extremewindspeedscanexceedmaximumoperationalcapacityandshutdownpowerproduction.Even as both onshore and offshore turbines can be affected by extremeweather, their relativelyshortlifespansmakethemmoreadaptableinthelongtermtochangingconditionsthanhydropoweror thermoelectric facilitieswhichhavehigh capital and environmental costs and a longer physicalandeconomiclifespan(WorldBank,2011).

However,unlikethermoelectricandhydropowerplants,windpowergenerationdoesnotusewaterin its generation process making it an attractive alternative in scenarios with decreased watersupplies(GAO,2014).

2.2.4. Solar

ClimatechangewillhavedifferentimpactsonsolarpowerproductionbasedonwhetherPVcellsorconcentratingsolarpower(CSP)areused.

PV cells see decreases in generation efficiencywhen air temperatures increases, and can also benegativelyimpactedbychangesincloudcover,humidity,haze,anddust(DOE,2013).Thedegreetowhich PV efficiency is impacted by temperature depends on the type of semiconductingmaterialusedinthecell.CrystallinesiliconPVcellscanseeconversionefficiencydecreasebyroughly0.08%per1.8°F (1°C) increase inair temperatureabove77°F (25°C (DOE,2013).Newer technologiesareaffectedaswell,buttoalesserextent(DOE,2013).

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CloudcoverhasdrasticimpactsonPVoutput,withproductiondecreasingbetween40%-80%withinsecondsduringcloudcoverinstancesandincreasingbackwhentheskybecomesclear(DOE,2013).Higherwindspeedscanhavedivergingimpactsonpanelsasitcancoolmodules,boostingefficiencyandoutput,butcanalsocauseincreasedpanelabrasioninaridregionsandcanspreaddustparticledepositsdecreasingproductioncapability(ADB,2012).

While decreasing water availability would not have a significant impact on solar PV powergeneration, the same is not true for CSP. Similar to thermoelectric generation, CSPplants requirelarge amounts of water for cooling which makes them vulnerable to increasingly scarce watersupplies(WorldBank,2011).

2.2.5. Transmissionanddistribution

TheUSelectricitygrid ishighlyvulnerabletoclimateandweather impacts, inparticular increasingtemperatures. The system is further extremely vulnerable to extreme events such as hurricanes,blizzards, and thunderstorms. A recent report from theWhiteHouse andDOE found that 58%ofpoweroutagesintheUSsince2002werecausedbysevereweather(seeFigure13)(DOE,2013).Thestudy estimated that these incidents cost theUS economybetween$18 and$33billion annually,withsomeanalysesputting the figureashighas$70billion (WhiteHouse,2013).Theseestimateshave led to an increased emphasis on improving grid resiliency to adjust to extreme weather.Extremeweather, climate change and climate variability are discussed in detail in Section 2.2 onclimatevulnerabilitybelow.

Figure13-Observedoutagestothebulkpowersystem,1992-2012(figuresourcedfromEIA,2013)

Currently, approximately 7% of all electricity generated at power plants annually is lost intransmission and distribution (EIA, 2012). These losses increase as temperatures rise andtransmission lines lose their capacity to carry a current (ORNL, 2012b). At the same time, hottertemperaturesincreasepowerdemandforcooling,stressingthedistributionsystemanddecreasingsubstationefficiencyand lifespan (CEC,2012).Higher temperaturesalsohavenegative impactsonphysicalassetsasheatcancauseoverheadtransmissionlinestosagwhichposesnumerousfireandsafetyhazardsandincreasesthelikelihoodofpoweroutages(DOE,2013).

Increasing temperatures combinedwith increased drought have led tomore frequent and severewildfires,whichareapotentriskfortransmissionanddistributionsystems(DOE,2013).Notonlycan

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powerpolesbe incinerated,heat, smokeandparticulatematterassociatedwithwildfirescanalsonegativelyaffectthecapacityoftransmissionlines(CEC,2012).Furthermore,sootaccumulationcancauseleakagecurrentswhichcanleadtooutages.Fireretardantsessentialtofirefightingeffortscanalsodamagetransmissionlines.

Transmissionanddistributioninfrastructurearealsothreatenedbynaturalhazardssuchasflooding,landslides,fallingrocks,andhurricanes(WorldBank,2011).Forexample,fallingtreesduringstormsandhighwindscanbringdowndistributionlinesordamageothernetworkcomponents.

Risingtemperatureswillamplifythesevulnerabilitiesjustasincreaseddemandputsfurtherstressonthesystem.Thecumulativeimpactofclimatechangeontransmissionanddistributionsystemsmaybe evenmore disruptive than on power generation.Whereas the failure of any individual powerplantcanbeoffsetbyothergenerationsources, transmissionanddistribution routeshave limitedredundancyandtransmissionlinesareoftenlocatedinremotelocations(ADB,2012).

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3. Climatedatainthepowersector

Climate data has multiple applications across the power sector and is used by a wide variety ofactors. This section shares examples from 69 interviews of how NCEI products and services areapplied,directlyorindirectly,insupportofpowergeneration,transmission,anddistribution.

Resultsofoutreach

Before contacting users and representatives in thepower sector, our teamengagedwith 18 staffwhoproduceordistributeclimatedataproductsandservicestothepowersector.These includedstafffromRegionalClimateCenters,RegionalClimateServiceDirectors(RCSD),stateclimatologists,NCEIinAsheville,theCooperativeInstituteforClimateandSatellites(CICS),andGST.

The next step was to reach out to potential data users in the sector. Contacts were identifiedthroughintroductionsfromthe18climatedataprovidersanddistributors,furtherresearch,existingcontacts,andbyaskingeachintervieweeforrecommendationsofwhoelsetospeakto.Intotal,110interview requests were sent by email to individuals representing utilities, solution providers,regulators, regional energy bodies, academic institutions, trade associations, sector groups, andgovernmentagenciesthatuseclimatedata.Atotalof51ofthe110peoplecontactedagreedtoaninterview(mostlybytelephone,thoughseveralinterviewswereconductedviaemail).

All users were screened for whether they do or do not use NCEI data (though only the Center’spreviousnameandacronymwereusedinemailsandphonecalls).MostsaidthattheirorganizationusesNCEIdataonaregularbasis,thoughthisusecouldbedirectorindirect.Inthelattercase,someusers did not know they usedNCEI data; when the interview determined, though questioning orfurtherresearch,thatanorganizationdidinfactusedatafromNCEI,thesescoreswereupdated.

Figure14–Sourceofclimatedata:numberandpercentageofrespondentsfromtheusercommunity

Intotal,69individualswereinterviewedforthisstudy.Theyrepresentawiderangeofsectoractorsandperspectives,asshowninFigure15below.

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Figure15-Powersectorintervieweesbycategory

3.1. Examplesofdatause

Nearly all interviewees use climate data on a regular basis for operations, maintenance, and/orplanning in thepower sector.Climatedata isused forvariouspurposesacross the sector,e.g. fordailytransmissionanddistributionplanningaswellasfor long-termplanningof infrastructureandsystemdesign.Theimportanceoftheaccuracyandaccessibilityofclimateinformationwasstressedrepeatedlythroughoutthecourseoftheinterviews.

Theenergyandclimatesectornon-profitorganizationC2ESreportsthatutilitiesoftenuseweatherand climate data acquired from private consultants, since consultants understand the decisionmakingandtypesofdatathataremostrelevantforpowerutilities(JoeCasola,pers.comm.).Withsomeexceptions thiswas found tobe largely true in this study. The choiceofNCEIdata, and thechoiceofvariablesusedbyutilitiesvarywidely.ClimateNormals,dataonheatingdegreedays(HDD)andcoolingdegreedays (CDD)areusedcommonly.GlobalHistoricalClimatologyNetwork (GHCN)and data on weather extremes are also used. Some utilities employ in-house climatologists ormeteorologists,anddeploytheirownoperationalnetworksandmesonets (e.g.SanDiegoGasandElectric),ordevelopin-houseproducts.

SpecificapplicationsofNCEIdataaredescribedbelow.

3.1.1.1. Loadforecasting

When trying to understand fluctuations in energy markets or problems in matching supply anddemand, the biggest explanatory value is usually weather. The Northeast Energy NetworkPerformanceAnalysis (NOAA)2003states that90%of load forecastingerrorsaredue toweather,making accurate forecasts extremely valuable (Wesley Hyduke, pers. comm.). Once the role ofweather is identified and understood, it allows a utility to address other issues (Robert Zacher,ComEd, pers. comm.). The importance of accurate weather and climate data is crucial, since ifmisjudged due to bad data, this can lead to brownouts with financial, industrial, and health

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ramifications. Understanding load also informs the buying and selling of electricity on regionalmarketsinanticipationofpricefluctuations.

Many solution providers are involved in load forecasting. Schneider Electric, for example, has 50meteorologists on staffwhoprovide temperaturedata toutilities in anhourly resolution forecastsystem that stretches 15 days into future. Though other variables are included, understandingtemperatureisthemaindriverofloadforecasting.TheAutomatedSurfaceObservingSystem(ASOS)is their main data source from NCEI, which they also archive internally and use for testing andrefiningtheirmodels.SchneiderElectricstaffalsouseClimateNormalsfromNCEI(WesleyHyduke,pers.comm.).

All utilities spoken to, whether public or private, said that a primary goal of their operationalplanningistomakeloadforecastsasaccurateaspossibleandthatthisrequiresreliableweatherandclimatedata. These forecasts combinemanykindsofdata, and frommany sources,withweatherandclimateplayingacentralroleforthreereasons:1)theirinfluenceondemand;2)theirphysicalimpact on installations; and 3) in the case of renewables, their influence on the supply ofwater,wind,andsolarforgeneration.

Electricutilitiesfrequentlyuseclimateinformationtoestimatedemandandsupplybothinthelongandshort term,anduse that information tooptimizegeneration fromthehourly toannual scales(Robert Zacher, pers. comm.). This is done by inputting the weather forecast (particularlytemperaturefigures)intoloadforecastingmodelstoestimatewhatloadtheycanexpecttomeet.

Casestudy:HOWONENONPROFITCOUNCILUSESNCEIDATATOSUPPORTITSREGION

Regionalnon-profitbodiesalsoprovide forecasts.TheNorthwestPowerandConservationCouncil(NPCC)servespowerutilitiesinitsregionbyproviding5and20-yearforecastloads,basedonhourlyandannuallevelsofdemand,respectively.Morethanhalfoftheirsystemishydro,andtheyusean80 yearhydrograph for theirmainwater systems toestimate flows. These andother services arebasedonclimateandweatherdatathattheyacquirefromNCEIandNWS.TheNPCC:

• comparesNCEI’s ClimateNormals to historic energy demand to determine the cause andaffectrelationship;

• uses NCEI’s Typical Meteorological Year (TMY) datasets to find correlations betweentemperature,wind,andhydroconditionstoseehowtheseaffectelectricitydemand;

• usesclimatic forecastmodels fromregionaluniversities,combinedwithdemandforecasts,to understand future conditions. Historical data fromClimateNormals are tied into thesemodels;

• provides itsmemberswithhistoricalweatherdata toassist inefficiency studies,when forexampletheyaretryingtodeterminetheeffectivenessofenergyefficiencyprograms,whichcanleadstobillionsofdollarsinsavingsforcustomersandtheutilities.

Though often indirect, NPCC attributesmaterial benefit fromusingNCEI data across their region.They have also had positive interactionswithNCEI. For example,when the Council had to create

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regional zones to represent different climates and their varied HDDs, NCEI helped them getpopulationweightedHDDandCDDdays and subzoneaverages. This allowedNPCC tomanipulatethedataquicklyandefficiently,savingweeksofwork(TomEckman,pers.comm.).

Bonneville Power Administration (BPA) is a self-funding federal non-profit agency based in thePacificNorthwest.Operatingonwhatisessentiallyaprivate-sectorbusinessmodel,BPAsellsenergyprimarily produced by 31 hydroelectric plants. BPA usesa variety of observed weather data,including from NOAA,tomonitor weather, snowpack and stream flow. Using ASOS stations, BPAlookstohistorictemperaturetopreparehourlyloadforecasts(ErikPytlak,pers.comm.).

Lower Colorado River Authority (LRCA), a non-profit public utility in Texas, maintains a diversegeneration portfolio to supply its wholesale electric customers with power. Bob Rose at LCRAdescribedhowloadforecastshelpthemsavemoney:

“Thebiggestbenefitofclimateandmeteorologicalinformationisabetterloadforecastandhavingabetterideaofwhatwillbehappeninginthenextfewdays.Accurateinformationsavesusmoneyinthelongrun,becausewemaynotneedtohavecertainplantsrunning.Thatreducescostssuchaspurchasesofgasorcoal”(BobRose,pers.comm.).

Case study: FOR SHORT OR LONG-TERM PLANNING, ACCURATE CLIMATEDATAISNECESSARY

SeattleCityLight,likemanyutilities,usesClimateNormalsfromNCEItoforecastfutureloads.Intheshorttermtheyalsouseotherweatherdatatoadjustloadbasedonactualweather.Theyuseseasonal forecasts of stream flow based on the Climate Prediction Center’s El Nino/La Ninapredictionstoplanfortheoperationsofdamsintheonemonthtooneyeartimeframe.

They develop a 20-year plan (updated every 2 years) to evaluate if the utility has sufficientresources tomeet energydemandover thenext 20 years. This resourceplan relies onClimateNormalsfordemandandhistoricalvariabilityinobservedstreamflowforsupply.

SCL uses NCEI’swebsite to access the information they need and funds research projectswithuniversitiestogetadditionalinformationforplanningpurposes.CrystalRaymondatSCLsays“thebetterthedatathemorewecannarrowtheuncertaintiesandwhattheseclimateimpactsare–andthebetterwecanplan”(CrystalRaymond,pers.comm.).

DespitethecommonuseofClimateNormalsforforecasting,manycompanies inthepowersectorraiseissueswiththem.While30yearsisstillseenasanindustrystandard,someconsultantsarenotsure they are good enough anymore and have asked for an update to the 30 year Normals orperhaps,even10to20yeardatasets(WesleyHyduke,pers.comm.).

Many consultants were pleased that they had access to 10-year NCEI Normals. Others howeverbelieved thatmore information was required. Commonwealth Edison, which serves the Chicagometropolitan region, prefers to useNormals fromNCEI butwishes that theywere updatedmore

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frequently.Tocompensate,ComEddevelopstheirowndatasetinthemiddleofthe10yearNormalscycle,sothattheyhaveanupdatedsetevery5years(RobertZacher,pers.comm.).

ComEdstaffarealsowrestlingwithwhattrendsampletouseforClimateNormals(whether10,20,or 30 years). If their goal is to assign a value to weather impacts, but climate change is shiftingweatherpatterns, theybelieve that itmightbebest toworkwithonly the recentpast.However,despitethatproblem,theyseethelast10yeartrendaspresentingtoomuchvariability,andstillrelyon30yearNormalsupdatedevery5years.TheyarelookingforleadershipontheseissuesandhopethatNCEIcanhelpthesectorthinkthroughthesechallenges(RobertZacher,pers.comm.).

3.1.1.2. Forecastinghydrologicalconditions

Weather and climate data are used to estimate the generation of hydroelectric facilities. Waterresourcesandthesubsequenthydroelectricgenerationpotentialcanvarywidelyyear toyearandfrom season to season. Data on snowpack, spring and summer stream flows, temperature, andprecipitationarecloselymonitored.

Accuratehydrologicaldata information isneeded forhydropowerand thermalelectricplants.TheNationalWaterandClimateCenter(NWCC)forexampleprovidesaSnowSurveyandWaterSupplyForecastingProgramwhichprovidesdatausedbymanyutilities. These includeprovidingdata forconservation,toolsforassessingwatersuppliesandclimate,andresourcesforaddressingquestionsonlocalandregionalconditions,droughtandclimatetrends.ForitsforecaststheNWCCusesbothdatacollected fromsnowsensing sitesanddata fromNCEI (includingclimateoutlooks forElNiñoandPacificDecadalOscillation),theWesternRegionalClimateCenter,theRiverForecastsCenters,OregonStateUniversity,andtheUnitedStatesDroughtMonitor(MichaelStrobel,pers.comm.).

AnotherexampleisPacifiCorp,whichowns47hydropowerfacilities,locatedinWashington,Oregon,California, Idaho,Utah andMontana to power households and businesses across theWest. Theirteam uses climate and weather data to facilitate flexible generation and load dispatch to meetdemandasitchangesduringadayoracrossseasons,helpingthemto:

• Anticipatetrendsinprecipitationforhydropowerplants• Forecastfuturereservoirconditionsforfloodcontrolandtoscheduleirrigationreleases• Forecastthevolumeofstoragewateravailableforirrigation,whichisdonemonthsahead,as

wellasplanningshorttermfloodcontrolreleasesduringhighintensityprecipitationevents• Determineevaporationfromreservoirs

PacifiCorpusespublicwind,precipitation,temperature,snow,solarradiationdata,andproductsfortheir operations, though little of this is sourced directly from NCEI. However, PacifiCorp collectssomeoftheirowndataatinstallations,andsubmitsomeofthosedatarecordstoNCEIthroughtheNWSCooperativeObserverProgram(ConnelyBaldwin,pers.comm.).

3.1.1.3. HDDandCDD

Closelytiedto loadforecasting is thepracticeofcalculatingHDDandCDD.DetectentusesclimatedatatobuildadisaggregationtoolforcalculatingCDDandHDDatahighresolution.Thistoolmapsweatherstationstozipcodes,andthenmapstemperatureandhumiditytothoseareas.Historicalclimate data from NCEI is used to tune and prove these models, testing results against knownoutcomes. One novel use of this information is correlating HDD and CDD to transformer loading,

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fromwhichtheyestimateequipmentmaintenanceandreplacementschedules(ToddThayer,pers.comm.).

3.1.1.1. Forecastingforotherrenewables

Meteorologicalandclimatedataareexpectedtohaveanincreasinglyimportantroleastherelativeproportionofgenerationfromrenewableenergysourcessuchaswindandsolarincreases.However,mostofthedatapertainingtoirradiance,windandrenewables,areproducedbytheprivatesectorandmaintainedinproprietydatasets.

Accurate solar irradiance and cloud data are needed to determine the output of solar facilities.However,mostofthecontactsinterviewedsaidthattheywerenotawareofNCEIdatabeingusedforforecastingsolargenerationoroperations.WinddatafromNCEIdatasetsmaynotbeuseful,asitiscollectedatsealevelratherthanatthecommonheightforinstalledturbines,80metersabovesealevel. Instead, a number of private companies have developed their own proprietary datasets.However, several contacts expressed the desire for this data to come from a free and reputablesourcelikeNCEI.TheNationalRenewableEnergyLaboratory(NREL)providestherenewablegenerationmarketintheUS andmultiple countries around theworldwith research, guidance, and access to data. Thoughthey have no climatologists on staff, they have begun using climate data, sourcing historical andprojecteddataontemperatureandprecipitationfromNCEIandNCAR.NRELstaffwanttousemoreclimatedataandevaluateitsimportancerelativetoenergyandclimateresilientpathways,butfacesomebasicmisalignments inthelevelofdetailofclimatedata.Amainissueisthatclimatedataisnot at a sufficientlydetailed geospatial or temporal resolution forwind, solar, andbiomass.NRELworkswithNOAAandprivatevendorstoaccessthedatatheyneed,butwould liketoseeclimatescienceevolveregardingthestandardsfordownscaling.Qualityandresolutionofdatasetsoverlongtemporalscalesiscriticaltoeffectiveenergyplanningapplications(DougArent,pers.comm.).

Case study:WHY ISA LEADINGENERGY SERVICESCOMPANYLOOKINGFORDATAOUTSIDEOFNCEI?*

Meteorologistsfromonemajorenergyservicescompany(whichrequestedtobekeptanonymous)discussedthestrengthsandweaknessesofusingClimateNormalsandNCEIproducts.ThiscompanyreliesontemperaturedatainNormalstocompareandcontextualizeforecasts,whichallowsthemtoanticipate energy demand. However, the power sector typically uses a 10-year climatologicaloutlook.NCEI’s30yearNormalsarenotrecentenough(1981-2010)tomeettheirneeds.Theysaythata10yearclimatologywouldbeahugebenefittothepowersector,asthemostrecent10yearsbetter captures the latest warming or cooling trends. This kind of data increases the value ofderivativeproductslikeweatherhedging,andallowsthisenergyservicescompanytobettergaugethemarket.TheywouldliketoseeNCEImeetthissectorneed(anonymousmeteorologists,energyservicescompany,pers.comm.).

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3.1.1.2. Real-timeweatherservices

OrganizationslikeEarthNetworks/WeatherBugserveutilitieswithreal-timeweatherandlighteningdata,forecastingsolutionsandvisualizationtoolstohelpcustomersinterprettheweatherandwhatitmeanstothemaselectricitycompanies.Thoughnotwillingtorevealtheprecisedetailsofwhichdatasetsareusedandhow,theysaidthatclimatedatafromNCEIprovideskeyinputsandisusedforground-truthingrealtimeforecasts(meteorologistatEarthNetworks,pers.comm.).

3.1.1.3. Managingtransmissioninfrastructure

The transmission infrastructure built and operated by ISO/RTO system operators also requiresclimatedata.Thoughmanyconsultantsandsectorexpertsspokeabouttransmissions,onlyoneISOagreedtoaninterview.TheCaliforniaISOoperatesthemajorityofthestate’sgridandfacilitatesthewholesaleenergymarketwiththegoalofloweringpricesanddiversifyingresourcesacrossthestate.ThisISOusesclimatedatainanumberofways:

• Topreparemonthlymarketdisruptionreports,whichareusedtounderstandtheimpactofthingslikeweatheronenergyprices;

• Toprepare load forecasts for thenext day, identifying trends anddetermininghowmuchenergyneedstobebought;and

• Toforecastenergyproduction,includingforwindandsolar,upto9daysout.

Todothis,theCaliforniaISOusesNWSandNCEIdataonprecipitation,temperature,humiditycloudcover and other variables. Climate data is particularly used for training forecast models andinforming renewable operations. Most of this data is provided through intermediary consultantswhoaccessNOAAdatadirectly(JimBlatchford,pers.comm.).

3.1.1.4. Sitingoffacilitiesandassetmanagement

Ittakesyearstobuildapowerplantandunderstandingclimatetrendsiscrucialfordecidingwhereto siteandhow largeapowerplant shouldbe. Several interviewees (e.g.BrianD’Agostinoat SanDiego Gas and Electric) said that archival climate data and predictions for 10 to 20 years in thefuture,combinedwithpopulationdata,areprimaryinputsinthedecisionmakingprocessforsitingnew facilities (BrianD’Agostino, pers. comm.).NCEI ClimateNormals, area go-to sourceformanyutilities, including BPA, for a variety of long term planning purposes(Erik Pytlak, pers. comm.). However,RobertReedatAlabamaPublicServiceCommissionemphasizedthat30-yearNormalsarenotpredictiveofnextyearandcertainlynotpredictiveof20yearsfromnow.InhisopinionthereisastrongneedwhensitingassetsformoreflexibleNormals,thatbeartheimprimaturofNCEI,asthesewouldassistinthedesignandplanningoffutureinstallations(RobertReed,pers.comm.).

Consultants are providing a number of new tools to utilities. One being developed by EarthNetworks/WeatherBugfocusesonassetmanagement,whichhelpsthemdeterminehowequipmentfaresundervariableweatherconditions.By lookingathistoricalweatherdatatoseehowweatheraffectedassetsoverthe lastdecadeormore,theycanworktobuildresiliencyusingpastweatherinformation(meteorologistatEarthNetworks,pers.comm.).

Case study: HOW CAN NCEI BALANCE THE NEEDS OF LARGE VS. SMALLSOLUTIONPROVIDERS?

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A leading international meteorological services company based in Europe, but with a smallAmericanoffice,highlyvaluestherawdataitgetsfromNCEI.Aseniormeteorologistonstaffsaidthat without NCEI’s contributions, their sector and their company would not exist. However,becausethiscompanyhasalargeR&Dteamonstaff,theyseeanyvalue-addedproductscomingfromNCEIasposingdirectcompetitiontotheirbusiness.

Oneof theirchiefproducts isanadvancedforecastingsoftwarethatreliesheavilyonNCEIdatafor training forecast models. They sell this to companies who use it at almost every stage ofdevelopingandoperatingpowerGTDinstallations:

• assessinginfrastructuresitingbasedon40yearsofhistoricalclimatedata;

• aidingtheconstructionofenergyinstallationsonandoffshorewithweatherforecasts;

• datatoinformoperationsandmaintenance;

• windandsolarpowerforecasts;

• informpowerandcommoditytradingbasedonweatherdata;

• manage transmission and distribution networks in the face of weather hazards andprovideearlywarningofextremeweather;and

• estimatepowerproductioncapacityanddemand.

Though focused on Europe, this international company relies on NCEI’s global data sets as itsprimaryrawinputfromwhichitcreatesthesetoolstoserve itscustomers.Astheyhavea largeteamofdataanalyststheyareverywaryofNCEI‘oversteppingitsboundaries’andincreasingtheuser-friendlinessofproductsandservices.Theyworrythatthiswouldallowotherconsultanciestosteal part of theirmarket share aswell as increase the number of companieswho couldworkdirectly with NCEI data, without a solution provider intermediary. This company considers thechallenge of accessing and using NCEI data a source of competitive advantage (anonymousmanageratmeteorologicalservicescompany,pers.comm.).

3.1.1.5. Retrospectiveanalysisandground-truthing

In addition to utilizing data for forecasting to avoid outages or damage, it is also used forretrospective outage analysis. Utilities use climate and weather data as a part of their risk andemergencymanagementstrategy, inparticular tounderstandwhat typesofweather,andatwhatmagnitude, correlatewith certain typesofpoweroutages. Thisdatahelps in answeringquestionsabouthowseverecertainextremeeventsareanticipatedtobeinthefuture,howbadtheywereinthepast,andtocompareittooutagesordamagesthatutilitieshaveexperiencedbefore(JoeCasola,pers.comm.).

Many utilities rely on experts like Earth Networks/WeatherBug to provide historical climate datautilized to analyze the correlation of severe weather impacts to outages. Beyond enabling thisforensic analysis, Earth Networks/WeatherBug also provides utilities with service territory-levelweatherdatausedtocreateshorttermforecastfeedsthataretheningestedbyutility-basedstormpredicationandoutagesmodelsforimprovedaccuracybyasmuchas50%.Moreandmoreutilities,

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including companies like Detroit Edison and National Grid are interested in analyzing thesecorrelations(meteorologistatEarthNetworks,pers.comm.).

Casestudy:HOWONESOLUTIONPROVIDERCALCULATESLIABILITYUSINGPASTCLIMATEDATA

Power System Engineering, Inc. (PSE) is a full service consulting firm for electric utilities. PSE’sclients include distribution cooperatives, generation and transmission cooperatives, investor-owned utilities,municipal utilities, public utility districts and industry associations. One servicethatPSEprovides isusinghistoricaldata todeterminehowextremeweatherevents impacttheperformance and reliability of the electricpower infrastructure. The aim is to use these resultstoestablishmodernizeddesignstandardsfortheconstructionofnewfacilitiesandhardeningofexistingfacilities,withtheintentofmitigatingagainstfutureweathercausedoutages.Thisisalsorelevantforbenchmarkingthereliabilityofutilities.PSEdevelopseconometricmodelstoquantifythe impacts of external variables utilities are facing, and advises what theexpectedreliabilityperformanceshould be or could be under given circumstances. Therefore data, especially onhourly wind speeds, lightningstrikesand ice storms(ice accumulation and concurrent windspeeds),are essential and someof this information is sourced fromNCEI (Erik Sonju and SteveFenrick,pers.comm.).

3.1.1.6. Technologydevelopment

Siemens,amongotherequipmentdevelopers,designsandsellstechnologyforpowersystems.Siteperformance is estimated using local weather andmeteorological data, or estimates provided byclients. Site-specific local climate-meteorological data is used to estimate the performance ofturbines at their clients’ proposed thermal and renewable sites. Clients will typically provideexpectedlocalclimateandmeteorologicaldatabasedonhistoricalinformation,whichSiemensusesas a proxy for conditions expected during commencement of commercial operation. This givesengineersawindowintothelikelyweatherextremesthatcouldaffecttheinstallation’sgenerationand performance characteristics. Local weather predictionswill not typically alter basic hardwaredesignfeatures,butitmayaffecttheturbine(orfacility)performance.Gasturbineperformanceishighly dependent upon the ambient temperature, pressure and relative humidity. Performanceguarantees are typically evaluated based on actual site environmental conditions,with correctionfactors that adjust the site conditions to original contract conditions. Data on temperature,precipitation,andhumidityareobtained frommanysourcesanddatasets,often fromNCEI(BruceRising,pers.comm.).

3.1.1.7. Servicemaintenanceandrestoration

Many utilities use climate and weather data to forecast stormsand/oruse historical weatherarchivestounderstandweatherimpactsontheirsystems.SomeuseproductslikeNEXRADtoassistinpreparationbeforeamajorstormhitstheirsystem(BrandonHertell,pers.comm.).Southern California Edison (SCE) uses climate data to understand outage management, stormpredictions,andhelp them interpret impacts to transmissionanddistributionsystems.Theyusea

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largestatisticalensemblethatincludesdatafromNCEI,andconductthesestudiesbothbeforeandafterextremeweatherevents.WheneverSCEseesextremeweathereventsdeveloping, theysendalertstotransmissionanddistributionmonitoringandrepairteams.Wind,intenserain(whichcouldcause erosion), and drought conditions (wind plus dry conditions) are all potentially problematic(PaulRoller,pers.comm.)

Case study: SECTORORGANIZATIONS SUPPORTUTILITIES, AND SOLUTIONPROVIDERS

ClimateandEnergySolutions(C2ES)isanindependent,nonpartisan,non-profitorganizationthatprovidesinformationandanalysisonthescientific,economic,technologicalandpolicydimensionsofclimateandenergychallenges.

There are other trade and sector organizations that work with private companies. Another isEdison Electric Institute, an association of shareholder-owned utilities that provides policy andtechnical resources to its members. These resources occasionally touch on issues related toextremeweatherandclimate.

Non-profitsandtradeandsectororganizationscanbeeffectivetranslatorsofclimateinformationand can help utilities understand how climate data can be valuable. However, because ofdifferences in missions and technical capacities, these organizations are typically not incompetitionwith serviceproviders.Whenworking in this capacity,non-profitsand trade sectororganizationscanperformanimportantroleinbuildingthemarketfortheclimateproductsandservices(JoeCasola,pers.comm.).

3.1.1.8. Strategicinvestmentsandmarketanalysis

Climate data is often used to inform or conduct due diligence on investments. Some furtherexamplesareprovidedbelow.

Siemensconductsstrategicmarketassessmentsfornewpowerprojectsandwillreviewarangeofeconomic, engineering and environmental factors in such an evaluation. This can include projecteconomics (including financing and capital costs), access to energy resources (pipelines andtransmissionlines),waterresourcesandlocalmeteorologicaldata(sometimesobtainedfromNCEI).The reviewmayhighlight theappropriate technology selection for a specificprojectbasedon thefinal location. This can be useful to decide a level of commitment for a potential investment orproductline(BruceRising,pers.comm.).

GEEnergyFinancialServiceshasateamthatinvestsininnovativepowergeneration,withsignificantfinancingofwindandsolar,forwhichtheyrelyonclimateandweatherdata.Thisdatais,however,usually acquired and handled for them by consultants,which they believe to be common amongtheir peers. They use this data to consider the design case for a given asset, assessing siting andoperational thresholds. The other use of data is predictive, as they work to understand howenvironmental conditions are likely to affect generation. They use these results to buy or buildgeneration facilities that can serve peakmarkets during periods of extremeweather (Senior RiskManager,GEEnergyFinancialServices,pers.comm.).

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3.1.1.9. Insuranceservices

Weatherandclimatedataareofhighimportancetothefinance,insuranceandreinsurancesectors.One strong example comes from Nephila, an insurance provider that protects businesses andmunicipalities from the adverse financial impacts of day-to-day weather and natural catastropheevents. They use historical climate data from NCEI and other sources to assess the likelihood ofhistorical weather events, correlate weather variability with the buyer’s variability of financialperformance, and to estimate the potential benefit of weather insurance in mitigating negativefinancialperformanceforthebuyer.Theyrelyonprivateweatherdataproviderswhoworkallovertheworldcollectingdatafromdifferentsources,bothprivateandpublic.GHCNDailyandIntegratedSurfaceDatabase (ISD)are themaindataproducts theyuse fromNCEI,andsomeof theproductsthattheytrustmost(MattColeman,pers.comm.).

Energycompanieslikenaturalgassuppliersandelectricityprovidersareregularbuyersofweatherinsurance. Based upon an estimate of the amount ofweather insurance currently sold to energycompanies,ananalystatNephilaestimatesthattheamountoffinancialriskduetoweatherthattheenergy sector insures is worth at least $2 billion annually (Matt Coleman, pers. comm.). Morebroadly,theglobalweatherinsurancemarketisgrowing,withindividualdealsreachinghundredsofmillionsofUSdollars.

For insurance and reinsurance firms, the role of government as themain source of credible andauthoritative data is crucial. When pricing and settling a weather risk transfer contract, allnegotiatingpartiesmustconsiderthedataauthoritative. IntheUSand inmanyotherpartsof theworld,Nephila considersNCEI as setting the standard for climate data. ThoughNephila identifiedways inwhichNCEIcan improve itsdata formattingandorganization, theysaythatsuchconcernsareminorwhencomparedtothevaluetheyobtainfromthedata.

3.1.1.10. Settingregulation

Many regulatorsuseclimateandweatherdata toassist inoverseeingutilities in their jurisdiction.Forexample, insomestatesClimateNormalsareusedbycommissionersforsettingelectricityandnaturalgasrates(RobertReed,pers.comm.).Also,commissionswillrequirethatutilitiesuseclimatedata, for example, to calculate weather-normalized numbers to demonstrate past and expectedusage (Robert Zacher, ComEd, pers. comm.). Commissions can also require utilities to undertakerigorousvulnerabilityassessments informed inpartbyclimateandweatherdata,as inthecaseofConEdand theNewYorkPublic ServiceCommissionafter the severe impactsofHurricanes IreneandSandy.

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4. Valueofclimatedatatothepowersector

The interviewsand research conducted for thisproject indicate that companies andorganizationsacross the power sector find material benefit in using climate and weather data. Only a limitednumberofuserswereableorwillingtoprovidefiguresshowingthefinancialbenefitthatthisdataofferstotheirorganization.Thissectioncontainsexamplesofmonetaryvalue,primarilyfoundintheinterviews conducted for this report and supplemented with desk-based research. In addition,please seeAnnexB for results of a survey sent to climate andweather service solutionproviders(notpowersectorspecific)onthevalueofclimatedata.

Theexamplesbelowshowtheapplicationofclimatedataandthevalueofthatapplication,throughthepricesofproducts, estimatesof lossesavoided,demonstrated cost savings, increased income,etc.Thevarietyofexamplesmakes itdifficult toestimate thevalueof thewholesector,butdoesindicatethebreadthanddepthofthevalueofclimateinformation.

AssociatingvaluewithNCEIproductsandservicesismoreanexerciseinattributionthancausation.ClimateandweatherdataarerarelyusedinisolationandfewifanyoftheseexamplesofvaluecanbeattributedtoNCEIalone.

Theseexamplesareall related topowerGTD.However, to collect asmanypointsof referenceaspossible,examplesfrombothweatherandclimatedataareused,theresultsarenotlimitedtotheUS,andvaluesincludedcanbebothrealandestimated.Also,notallsourceswereabletoconfirmifthedatatheyusedwassourcedfromNCEI.

DESCRIPTIONOFVALUE VALUE(realorestimated)

USESNCEIDATA?

Tennessee Valley Authority manages a 42,000 sq. mile river systemthat includes an integrated series of 49 dams to provide multiplebenefits including flood control, navigation,power,waterquality andsupply, and recreation. They achieve this through the use of manydataresources, includinganin-houserainandstreamgaugenetwork,co-operated USGS gauge networks, short and near term weatherpredictions from NOAA; the Weather Prediction Center, the Hydro-meteorological Predication Center, the Lower Mississippi RiverForecast Center, and climate and weather data from NCEI, includingClimateNormalsanddataonextremes(JeffHouse,pers.comm.).

$240millionannually(averaged)inavoideddamage$1billionannuallyinshippersavingApproximately$500millionannuallyinhydropowervalueQualityoflife,abundantwatersupply,recreationvalue,ect

Yes

Threeoutof fivewildfires in the SanDiegoGas andElectric (SDG&E)serviceareawereallegedlycausedbyelectricaldistributionsystems.In2007, a combination of dry conditions and strong Santa Ana Windsdamaged power distribution and transmission systems and fueledmassive fires that burned over 300,000 acres, or 13 % of SDG&E’sservice territory. These fires were attributed to damage to theelectricitysystem,andtheutilityhad topay$2billion inhundredsof

$Billionsofliabilityavoidedaftermajorwildfire

Yes

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settlementcases.

The company carries an enormous financial risk by operating theelectricgridinsuchahighfireriskareasothecompanytookproactivemeasures to mitigate this multi-billion dollar risk. Working with theWestern Regional Climate Center and data from its own mesonet,SDG&Eusedhourlyweather analysis going back 30 years to rate thefire potential of weather conditions and create an index that cansupportdaytodayoperations.

In May 2014, drought conditions and a strong Santa Ana windreplicated the conditions of 2007, but SDG&E was prepared andpreemptivelyshutoffselectcircuitsoftheirdistributiongrid.Noneofthewildfiresthathappenedduringthateventwerefoundtobecausedby their power systems, and the company avoided/decreasedpotentially very large internal and community impacts (BrianD’Agostino,pers.comm.).

Nephila structured a basket of deals for a US utility that operatesacross multiple geographies, to protect against low revenue thatresultsduringawarmwinter(MattColeman,pers.comm.).

$15millionofcoverage(basketofinsuranceproducts)

Yes

Nephilastructuredadeal forasingleUSutilitytoprotectagainst lowrevenue that results during a warm winter (Matt Coleman, pers.comm.).

$10millionofcoverage(singleinsuranceproduct)

Yes

NephilausedBrazilian(INMET)andUruguayan(InUMet)weatherdataasprimaryinputstoco-structureaninsuranceproduct(viatheWorldBank)worth$450milliontoprotectagainstdroughtforahydroelectricinstallationinSouthAmerica.ThisinternationaldealrepresentsarealisticdealsizethatcouldbereachedintheUS.IfsuchadealwereexecutedwithintheUS,NCEIdatawouldlikelyserveasthedatausedtopriceandsettlethetransaction(MattColeman,pers.comm.).

$450millionofcoverage(singleinsuranceproduct

No

Theglobalmarketforweatherrisktransferforenergyutilitiesisvaluedtobeat least$2billion. Insurancecoverageofthisvalueispurchasedonanannualbasis.Asthemarketcontinuestogrowand increasinglyserve the renewable energy sector (in addition to the traditionalenergy sector), that value could grow to exceed $5-10 billion (MattColeman,pers.comm.).

$2and$10billionannually

Yes&No

US electricity generators save $166 million annually using 24-hrtemperatureforecaststounderstandelectricitydemandandoptimizetheirmixofgeneratingunits(Teisbergetal.,2005).

$166millionannuallyinUS

Uncertain

Using an ENSO forecast helped a plant manager save in natural gaspurchases over the course of the 1997–1998 winter season when,seeingpredictionsofawarmwinter, theplantmanagerchose tonotlock in a price but instead buy natural gas on the spot market

$500,000inannualsavingsforonegenerationplant(in1998USD)

Uncertain

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(Changnonetal.,1999).

The Snow Survey and Water Supply Forecasting (SSWSF) Programsupports decision-making in the operations of Idaho Power, whichownsand runs17hydroelectricplants.Theamountof snowpackanditsrateofmelthaveasignificantimpactonthegenerationofitsplants.Idaho Power uses SSWSF on a daily basis to inform its “fill and spill”operations and cloud-seeding operations. SSWSF extensive historicalinformation, based in part on Climate Normals, allows the utility tomake probabilistic forecasts up to a year in advance that allow it toadjustitsoperationsandforecasts,savingmillionsofdollarseveryyear(MikeStrobel,pers.comm.,Nelson,2008&Pierce,2010).

$18millionapproximatepotentialannualrevenueloss

Mostlyfromothersources,butalsoincorporatesClimateNormalsfromNCEI

Utility operators could save $15 million annually and improve gridreliability using day-ahead trading with a program to improve solarirradianceforecasts(Lazo,2015).

$15millionannually

Uncertain

Streamflow forecasts were used to increase energy production frommajor Columbia River hydropower dams by 5.5 million MWh/year,resulting in significant increases in annual revenue (Hamlet et al.,2002).

$153millionincreaseinannualrevenue(average)

Uncertain

It was shown that estimating the impact of short-term wind speedforecasts on the price of electricity in Scotland allowed providers toraisethepricesofwindenergyby14%(Barthelmieetal.,2008).

$7.50perMWhincreaseinprice(2003USD)

No

TheElectricPowerResearchInstitutesellsareportfromOctober2014titled “Integration of Internal and External Data Sources to SupportTransmissionOperations, Planning, andMaintenance:Weather EventandPublicDataAssessment”3.

$25,000foronereport

Yes

EPRI sells a 2008 report called “Weather Normalization of ReliabilityIndices”4usinghistoricalweatherandutilityreliabilitydatatoexplorethe relationship between weather and power system operatingparameters.

$4,750foronereport

Yes

Thesaleofweatherderivativesintheelectricpowerindustryindicatesonewayofvaluingbetterweatherpredictions.HDDsandCDDs,whicharekeyinloadforecastingandfacilitymanagement,arethemainfocusofweatherderivativesusedinthesector(Hertzfeldetal.,2003).

$4billioninweatherderivatives

Uncertain

XcelEnergy,amid-westernpower company,has calculated thevalueof variable generation forecasts. Their Senior Trading Analyst DrakeBartlettshowedthatby improvingtheirabilitytopredictandaccountfor short-term variability, Xcel was able to save $38 million over 5years.DatafortheirvariablegenerationforecastisprovidedbyGlobal

$38millionsavedover5years

Uncertain

3Thereportisavailablehere:http://www.epri.com/abstracts/Pages/ProductAbstract.aspx?ProductId=0000000030020025894Thereportisavailablehere:http://www.epri.com/abstracts/Pages/ProductAbstract.aspx?ProductId=000000000001015857

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Weather Corporation, who mostly use datasets of uncertain origin(XcelEnergy,2008).

AnnexA:Interviewcontactsfrompowersectoroutreach

UtilitiesandtransmissioncompaniesandorganizationsBobRose,ChiefMeteorologist,LowerColoradoRiverAuthority

BrandonHertell,Meteorologist,ConEdison

BrianD’Agostino,Meteorologist,SanDiegoGasandElectricandleaderofAmerican

MeteorologicalSociety'sEnergyCommittee

ConnelyBaldwin,WaterResourcesEngineer/Hydrologist,PacifiCorp

CrystalRaymond,ClimateAdaptationStrategicAdvisor,SeattleCityLight

DennisKelter,ManagerofLoadForecast,CommonwealthEdisonCo

ErikPytlak,Manager,WeatherandStreamflowForecasting,BonnevillePowerAdministration

JeffHouse,ShortTermLoadPlanner,TennesseeValleyAuthority

JimBlatchford,Manager,ShortTermForecasting,CaliforniaISO

KrestaDavis-Butts,OperationsHydrologyLeader,IdahoPower

PaulRoller,Meteorologist&EnergyForecastingAnalyst,SouthernCaliforniaEdison

RobertZacherJr.,PrincipalLoadForecastingAnalyst,CommonwealthEdison

(anonymous)SeniorLoadForecastersatmajormunicipalutility

WesleyHyduke,DirectorofMeteorologyOperations,SchneiderElectric

SolutionprovidersAdamSimkowski,Meteorologist,ACES

AlisonTaylor,VicePresident,Sustainability-Americas,Siemens

BillMorris,SeniorMeteorologist,ACES

BruceRising,StrategicBusinessManagement,Siemens

ErikSonju,VicePresident-PowerDeliveryPlanning&Design,PowerSystemEngineering,Inc.

KristinAnnLarson,DirectorofWeatherForecasts,GlobalWeatherCorporation

MaryGlackin,GlackinandAssociates,LLC

RichendaConnell,ChiefTechnicalOfficer,Acclimatise

RobertBlevins,CEOandSeniorMeteorologist,MeteorologicalConnectionsLLC

RyanOates,JuniorMeteorologist,NobleAmericas

StephenBennett,SeniorVicePresident,VeriskClimate

SteveFenrick,LeaderofEconomicsandMarketResearchGroup,PowerSystemEngineering

ToddThayer,Sr.DirectorOperations,Detectent

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Wei-TaiKwok,ChiefOperatingOfficer,AndalaySolar

WesleyHyduke,DirectorofMeteorologicalOperations,SchneiderElectric

(anonymous)ManagerandAnalystatleadinginternationalmeteorologicalservicescompany

(anonymous)MeteorologistatEarthNetworks

(anonymous)MeteorologistatlargeAmericanenergycompany

(anonymous)Vice-presidentatTexas-basedenergyservicesfirm

(anonymous)TworepresentativesfromaUSenergyservicescompany

Tradeassociations/sectororganizationsBenjaminMatek,IndustryAnalyst,GeothermalEnergyAssociation

JillianM.Vignoe,SeniorProjectConsultant,EdisonElectricInstitute

JoeCasola,StaffScientistandProgramDirectorforScienceandImpacts,C2ES

MattMarsh,EnvironmentalProtectionSpecialist,WesternAreaPowerAdministration

RyanSchuchard,AssociateDirectorClimateChange,BusinessforSocialResponsibility

TomEckman,PowerPlanningDirector,NorthwestPowerandConservationCouncil

WilliamK.Drummond,ExecutiveDirector,Mid-WestElectricConsumersAssociation

Finance/insurancecompaniesBrookPorter,Associate,KleinerPerkinsCaufieldandByers

JohnKunasek,HeadofPower&UtilitiesAmericas,KPMG

MattColeman,PortfolioAnalyst,NephilaInc.

(anonymous)SeniorRiskOfficer,GEEnergyFinancialServices

Non-NCEIgovernmentagenciesDougArent,ExecutiveDirectoroftheJointInstituteforStrategicEnergyAnalysis,National

RenewableEnergyLab

JaneCallen,EconomicInformationOfficer,USDepartmentofCommerce/Economicsand

StatisticsAdministration

JoeIntermill,ServiceCoordinationHydrologist,NOAA

MichaelStrobel,Director,NationalWaterandClimateCenter

RobertReed,ChairmanofNARUCGasSubcommittee,andNaturalGasManager,AlabamaPublic

ServiceCommission

ShawnLange,UtilityEngineeringSpecialistIII,MissouriPublicServiceCommission

ThomasWilbanks,GroupLeader,EnvironmentalSciencesDivision,OakRidgeNational

Laboratory

RegionalClimateServiceDirectors,RegionalClimateCenters,andStateClimatologists

BethHall,Director,MidwestRegionalClimateCenter

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CharlesE.Konrad,Director,SoutheastRegionalClimateCenter

DavidBrown,NOAARegionalClimateServicesDirector,SouthernRegion

DougKluck,NOAARegionalClimateServicesDirector,CentralRegion

EllenMecray,NOAARegionalClimateServicesDirector,EasternRegion

JohnNielsen-Gammon,TexasStateClimatologist

KevinWerner,NOAARegionalClimateServicesDirector,WesternRegion

MikeAnderson,StateClimatologist,CaliforniaDepartmentofWaterResources

StuartFoster,StateClimatologist,KentuckyClimateCenter

WendyRyan,AssistantStateClimatologist,ColoradoClimateCenter

NCEI,GST,andCICSAnthonyArguez,NormalsProgramManager,NationalCentersforEnvironmentalInformation

CandaceHutchins,ProjectManager,GlobalScience&Technology,Inc.

CarlSchreck,ResearchAssociate,CooperativeInstituteforClimateandSatellites

DanWunder,ProgramManager,GlobalScience&Technology,Inc.

DeWayneCecil,ChiefClimatologist,GlobalScience&Technology,Inc.

GregHammer,Meteorologist,UserEngagementandServicesBranch,NationalCentersfor

EnvironmentalInformation

JennyDissen,Outreach,CooperativeInstituteforClimateandSatellites

TamaraHouston,PhysicalScientist,UserEngagementandServicesBranch,NationalCentersfor

EnvironmentalInformation

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AnnexB:Surveyonthevalueofclimateandweatherservices5

NCEIisamajorcreatorandsupplierofclimateandhistoricalweatherdata,whichitprovidesfreeofcharge. Once the data is formatted, edited or undergoes value-added processes, this generatesdirectvaluetotheUSeconomybothasadecision-makingresourceaswellascreatingamarketplacefor‘intermediaries’,firmsthataddvaluetorawdata.Inthissectionweshareresultsfromasurveywith the goal of providing a data baseline approximating the value of services, and in turn helpindicatethevalueoftheunpriceddataofferedbyNCEIandothergovernmentdataproviders.

There have been some attempts to estimate the value of climate and weather data. PrivatecompaniesintheUScreateandsellanestimated15millionvalue-addedproductsandservicesthatarebuiltonthisdata(Konkel,2014).However,existingestimatesofthevalueoftheseservicesorofthemarketasawholeappeartobesimplisticorgeneralized.Forexample,inarecentanalysis,theDepartmentofCommerce’sEconomicsandStatisticsAdministration (ESA)estimated thatweatherdata is valued 6.2 times higher than the government cost of producing forecasts (ESA, 2014). In2008,NOAA’schiefeconomistsaidthat“NOAAreal-timedatasuppliesaburgeoningprivateweatherservice industry with well over $700 million in value added annually” (Weiher, 2008). A furtherliteraturereviewandinternetsearchshowedadditionallycontradictoryestimates(Wisenberg,2011;Spiegler,2007),andthatfewifanycompaniesinthissubsectorposttheirpricespublicly.

Though a full value analysis is out of the scope of this project, Acclimatise created a short andanonymoussurveytoasksolutionproviders if theycouldsharetheapproximaterevenueandcostperitemoftheproductsandservicestheysellwhicharebasedongovernment-providedclimateandweatherdata.Solutionprovidersmadeupamajorpartoftheintervieweegroupscontactedforbothstudies,butthemajorityofthecontactswereunwillingtosharemonetaryfiguresoverthephoneorontheirwebsites.Thebenefitofusingasurveywasthatitprovideduserswithanonymity.Becauseofthesensitivenatureofthesequestions,a lowresponseratewasanticipated.Manyofthefirmsinterviewedwereaskedtocomplete thissurvey,and inorder toavoidduplicationandreducetheonusplacedonparticipantsthissurveyincludedonly5questionstargetedatunderstandingvalue.

A total of 116 solution providers were contacted for this survey. They were identified through anumberofmeans, includingNCEI staff,pastNCEIworkshopattendance,NationalWeatherService(NWS) solutionprovider lists6, researchdone forpreviousAcclimatise studies,and targetedonlinesearches.BecauseNCEIdatahasbothclimatologicalandmeteorologicalapplications,andbecausethese are often blended both in practice and in the opinion of practitioners, the survey did notdifferentiatebetweenthetwofields.

4.1. Results

Thissurveywassentto116weatherandclimatesolutionprovidersworkingintheUS.Atotalof17companies completed the survey, a 12% response rate. Though this sample is not large orstatistically significant topermita fullestimationof themarketvalue, resultsdoprovidepointsof

5Pleasenotethatthissurveywasnotspecifictothepowersector.Duetothegenerallackofdataonthevalueofclimateservicesandtheanticipatedlowresponserate,thissurveywassenttoaswidearangeofsolutionprovidersaspossible.Sowhilesomeofthe116consultingcompaniessurveyedwerealso interviewedorcontactedforaninterviewinthepowersectorengagementstudy,mostwerenot.6Availableherehttp://www.nws.noaa.gov/im/metdir.htmandherehttp://www.nws.noaa.gov/im/more.htm.

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referencewhichallowNCEItobetterunderstandthemarketvalueofitsproductsandservicesandthepricepointsofsomeproductsandservices.

4.1.1. Questions1and2

InresponsetoQuestion1,allrespondentssaidthattheyuseweatherand/orclimatedata.

Figure16-Responsestoquestion"Wheredoyouaccessweatherandclimatedata?"7

InresponsetoQuestion2,NCEIandNWSwerecitedastheprimary,andformanytheonly,sourceofweather and climatedata. The fact thatNCEIdata is hostedbyanumberof the sources listedbelowwasnothighlightedinthecreationofthesurvey,astheoriginofdataisapointofcommonconfusionamongdatausers.Respondentsalsoincludedanumberofotherdatasources;

• EuropeanCentreforMedium-RangeWeatherForecasts(ECMWF)• StateandRegionalClimateCenters• Othercountries:Japan,EuropeanUnion,etc.• FederalAviationAdministration(FAA)• NationalHurricaneCenter(NHC)• NationalSevereStormsLab(NSSL)• CoCoRaHS/Co-opobservers• Miscellaneous: “various sites that display forecastmodel data”, other vendors (lightning),

weatherenthusiasts

ThereispotentiallysomereportingbiasasinitsinitialoutreachemailAcclimatiseemphasizeditstiestoNCEI,makingusersfamiliarwithNCEImorelikelytorespondthanusersfamiliarwithotherdataproviders.However, these responses still underscore thepredominant roleNCEI andNWSplay inthefieldofclimateandweatherdata.

7Notethatfullnamesofansweroptionswereusedinthesurvey.

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4.1.2. Question3

Users were asked to describe the products and services they sell. Many categories of appliedmeteorologicalandclimatologicalapplicationswerenoted,fallingunderthefollowingcategories:

• Creation of value added products for sale to specific industries such as infrastructuredevelopment, engineering, contractors, property managers, insurance, legal, weatherenthusiasts,media,etc.

• Forensicmeteorology.• Certifiedweatherstatements.• Realtimeandnearrealtimeweatherdataandproducts.• Globalweatherforecastingservices.• USweatherforecastingservices.• Globalmarineweatherforecastsandhindcasts.• Satellitederivedirradiancedataandforecasts.• Tropicalcycloneimpactanalysisandforecasts.• Radar, hail, hurricane, snow, ice, andwind products, both as forecasts and as post-event

analyses.• Operationalweathermodificationprograms.• Studiesonextremeweatherforecasts.• Saleofweatheroptionstoorganizationswithweather-relatedfinancialrisk.

Thislistisnotanexhaustiverepresentationofapplications,asitreflectsonlytheapplicationsofthecompanies who responded to the survey. However, this list highlights the diversity of dataapplicationsamongevenasmallsample.

4.1.3. Question4

Most respondents shared approximate values of their climate and weather services, products,and/or subscription services they sell. Thewide range of figures alignwithwhat is known of thesector, namely that the size, sophistication, and specialization of solution providers varieswidely,with a similar diversity in the value of their products and services as well. Some companies arecomposedofonlyasingleconsultantwithavery limitedrangeofservices,whileothercompanieshavelargededicatedteamsworkingondiverseprojects.

Samplesize

Range Totalcombinedrevenue

Mean

Combinedannualrevenue 11 $40,000to$5,000,000 $14,335,000 $1,303,182

Products(annualrevenue) 7 $400,000to$5,000,000 $7,750,000 $1,392,857

Services(annualrevenue) 7 $40,000to$5,000,000 $6,585,000 $940,714

Subscriptions(averageunitcost)8 5 $200to$500,000

Products(averageunitcost) 3 $50to$15,000

8Forthepurposesof thissurvey, itwasassumedthatasubscriptioncouldprovideproducts,services,orboth,andthatannualrevenueforsubscriptionsisfoldedintothefiguresforproductsandservicesasrelevant.

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Services(averageunitcost) 4 $310to$32,000

Elevencompaniesestimatedtheirtotalannualrevenuefromproductsand/orservices,atanaveragerevenueof$1,303,182.Ifthisaveragecanbemultipliedacrossthe116solutionproviderscontactedforthissurvey,theirtotalannualrevenuewouldbeover$150milliondollars.

Thedatapointsonunitcosts(products,services,andsubscriptionservices)weretoofew,andtheunitsthemselvestoodisparate,toallowforanalysis.

Aconsistentchallengeinassessingthevalueofclimateandweatherdataisdifferentiatingbetweencausation and attribution. Climate and weather data are nearly always combined with data andtechnical knowledge from other fields to create new applied products and services. Thus, thesepricesbelowreflect thevalueofproductsandservicesthatrelyonclimateandweatherdataasacriticalinputamongmanyinputs.

Theresponsesbelowfromindividualcompaniesarebrokendownbyunitcostandrevenues,whichallowssomeinsightintospecificbusinessmodels.

Companydescription Annualsubscriptioncosts

Productcosts(byunit)

Servicecosts(byunit)

Totalannualrevenue

“Globalweatherforecastingservices.”

$6,000 $6,000 $2,700,000

“CertifiedWeatherStatementstocontractors,propertymanagers,insuranceandlegalclients”

$1,200 $50 $100,000

“Tropical cyclone impactanalysisandforecasts”

$40,000 $15,000 $30,000 $670,000

“Valueaddedproductsforvariousindustries,weatherenthusiastsandforensicmeteorologyservices”

$200to$500 $1,300,000

“Appliedmeteorologicalandforensicconsultingservices”

$750 $75,000

“Forensicmeteorology” $310 $350,000

4.1.4. Comments

SeveralrespondentsleftcommentsforNCEIinanoptionaltextboxattheendofthesurvey.Theseuneditedcommentsarebelow.

• “ItisveryimportantthatNOAAandrelatedgovernmentagenciesdonotofferproductsthatcompete with private sector products. Good coordination with the private sector is

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essential. Government agencies should provide the data products that the private sectorwouldnototherwiseprovide,e.g.rawsatellitefeedsandnumericalweatherforecasts,notirradiancedataandforecasts.”

• “Verygladtoseeyouareexploringhowtohelptheprivatesector(especiallysmallbusiness)gainaccesstoNOAA'sdatasetssowecanaddvalueforspecificbusinessapplications.”

• “EliminatetheredundancyofRegionalClimateCentersandNCDC.”• “NCDCisourmostessentialsourceofweatherandclimatedata.”

4.2. Conclusion

These results and comments, collected in a short timeline and froma small sample, indicate thatclimateandweatherdatahavesignificantvaluetotheprivatesectorandinturntotheUSeconomy.Theseresultsalsoprovidesomefigures tobegin toapproximatethatvalue.Moreover,asadozencompanieswerewillingtosharehighlyconfidentialfinancialinformation,thissignalsthegreatvaluethattheyderivefromtheNCEIdata.TherespondentsrecognizethattheirbusinessesmodelreliesontheavailabilityofNCEIqualitycontrolleddata.Thereisroomtobuildonthisrapportandidentifyfurtheropportunitiestoexpandontheresultsofthissurveyandbuildamorecompletepictureofthemarketvalueofclimateandweatherdataproductsandservices.

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